Provision Language
Definitions
“Net Sales” means the total amount invoiced or otherwise charged (including fair market value of any non-cash consideration) by Licensee orSublicensee on account of the sale, lease, provision, transfer, or other disposition of a Licensed Product to a customer, after deduction of the following in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) to the extent itemized in applicable invoices, and not otherwise reimbursed, and allowed: insurance, handling and any shipping costs, allowances because of returned rejected, or recalled products, or sales or other excise taxes or other governmental charges levied on or measured by the invoiced amount (including, without limitation, value added taxes to the extent that such tax is incurred and not reimbursed, refunded, or credited under a tax authority), brokerage, customs and import duties or charges and normal and customary trade and quantity discounts (including chargebacks and allowances) and rebates that are for the applicable Licensed Products. If Licensee or Sublicensee makes any sales to any third party in a transaction in a given country that is not an arms’-length transaction, or is transferred to a third party without charge or at a discount, then Net Sales means the gross amount normally charged to other customers in arm’s length transactions less the allowable deductions set forth above. In the case of transfers of LicensedProducts between any of Licensee, Sublicensees, or their respective Affiliates for subsequent sale, lease or other transfer, then Net Sales will be the greater of the total amount invoiced or otherwise charged (including fair market value of any non-cash consideration) (i) for the transfer of the Licensed Products between Licensee, Sublicensees or Affiliates, as applicable, or (ii) for any subsequent sale of such Licensed Products in an arms’-length transaction.
“Sublicensing Income” means any consideration (including, without limitation, any licensing or optioning fees, or license maintenance fees, or milestone payments, and fair market value of any non-cash consideration) received by, or payable to, Licensee from any Sublicensee, under or on account of a Sublicense. Sublicensing Income excludes earned royalty payments but only to the extent such royalty payments are calculated using the same sales that generated payment of an Earned Royalty to The Regents pursuant to Section 4.3.
4. CONSIDERATION
4.1 License Fee. In partial consideration for the License, Licensee will pay to The Regents a license issue fee of one hundred thousand dollars($100,000) within thirty (30) days of the Effective Date. This fee is non-refundable and is not an advance against royalties.
4.2 License Maintenance Fee. Licensee must pay to The Regents the license maintenance fee of five thousand dollars ($5,000) (“License Maintenance Fee”) on the Second Anniversary of the Effective Date and each anniversary thereafter until Licensee or a Sublicensee commence selling Licensed Products and commences paying Minimum Royalties hereunder. License Maintenance Fees are non-refundable and are not an advance against royalties.
4.3 Earned Royalty. Licensee must pay to The Regents an earned royalty of [***] of Net Sales (each an “Earned Royalty”). All Earned Royalties under this Agreement will be computed for, and paid within thirty (30) days of the end of, each quarter ending March 31st, June 30th, September 30th, and December 31st of each calendar year (wherein the sale will be deemed to have occurred upon the earliest of the following(as applicable): (a) the transfer of title to or shipment of, or the provision to a customer of, a Licensed Product (b) the provision of an invoice with respect to a Licensed Product, or (c) receipt of payment for, such Licensed Product.
If Licensee is obligated to pay a non-Affiliate third party (other than The Regents) royalties on net sales (“Third Party Royalty”) inconsideration for patent rights owned or controlled by such non-Affiliate third party without a license to which Licensee would necessarily infringe such third party patent rights in the practice of the Patent Rights, then Licensee will have the right, upon Licensee’s execution of a license with such third party for such third party patent rights, to credit thirty-three percent (33%) of any earned royalty payment made to such third party in any given year in consideration for such third party patent rights, against the royalty due The Regents under this Agreement, provided that:
(i) On an ongoing basis, and prior to reduction of any royalty due The Regents under this Agreement for a given calendar quarter, Licensee first provides written evidence to The Regents of Licensee’s royalty obligations to such third party for such calendar quarter demonstrating that such royalty obligation is in consideration for patent rights owned or controlled by such non-Affiliate third party without a license to which Licensee would necessarily infringe such third party patent rights in the manufacture, use, import, offer for sale, or sell of a Licensed Product; and
(ii) In no event shall royalties or other amounts due to The Regents under this Agreement in any reporting period be so reduced to less than fifty percent (50%) of the amount that would otherwise be due The Regents under this Agreement.
If the Licensed Product is sold by Licensee or a Sublicensee as a component of another product such as a kit, composition of matter or other combination product (each of the foregoing products that contain a Licensed Product as a component a “Combination Product”), Licensee shall pay The Regents a royalty on such sales by Licensee or Sublicensee(s) of such Combination Product by treating such Combination Products as a Licensed Product and the royalty due The Regents on sales of such Licensed Product shall be calculated in accordance with the royalty provision set forth herein.
4.4 Validity Challenge. If Licensee or a Sublicensee, itself or through a third party, institutes any proceeding that contests the validity of anyPatent Right during the term of this Agreement, Licensee agrees to pay to The Regents, directly and not into any escrow or other account, allroyalties and other amounts due in view of Licensee’s and its Sublicensees’ activities under this Agreement during the period of challenge and theentirety of The Regents’ legal (including attorney) fees and costs incurred during such proceeding. Should the outcome of such contest determinethat any challenged patent claim is valid, Licensee (or its Sublicensee, as applicable) will thereafter, and for the remaining term of thisAgreement, pay a royalty rate of three (3) times the royalty rate specified above.
4.5 Minimum Annual Royalty. Licensee must pay to The Regents the following minimum annual royalties (“Minimum Annual Royalties”) on or before February 28 of each calendar year (“CY”) following the calendar year in which Licensee achieves a First Commercial Sale and continuing for the remaining term of this Agreement thereafter. The Minimum Annual Royalty will be credited against the Earned Royalty due and owing with respect to Net Sales made during the calendar year in which such Minimum Annual Royalties were paid. [Table redacted].
4.6 Sublicensing Income. Licensee will pay to The Regents a percentage (as defined in this Section 4.6 below) of all Sublicensing Income within thirty (30) days of receipt thereof:
A. [***] of all Sublicensing Income received with respect to any Sublicenses executed prior to the first human patient being dosed with a Licensed Product in a first phase 1 clinical trial;
B. [***] of all Sublicensing Income received with respect to any Sublicenses executed concurrently with or after the first human patient is dosed in a first phase 1 clinical trial of a Licensed Product but before the first patient is dosed with a Licensed Product in a first phase 2 clinical trial;
C. [***] of all Sublicensing Income received with respect to any Sublicenses executed concurrently with or after the first human patient is dosed in a first phase 2 clinical trial of a Licensed Product, but before the first patient is dosed with a Licensed Product in a first phase 3 clinical trial of a Licensed Product; and
D. [***] of all Sublicensing Income received with respect to any Sublicenses executed concurrently with or after the first human patient is dosed with a Licensed Product in a first phase 3 clinical trial.
Sublicensing Income may not be prorated when the Patent Rights are bundled with other intellectual property, without The Regents’ prior written consent. For the avoidance of doubt, all payments and consideration that Licensee or a Sublicensee receives as a result of its exercise of its rights to the Patent Rights will be accounted for by Licensee either in the form of an Earned Royalty under Section 4.3 or as Sublicensing Income under this Section 4.6.
4.7 Milestone Payments. For each Licensed Product, Licensee must make the following payments (“Milestone Payments”) to The Regents within thirty (30) days of achieving the Development Milestone indicated below. For purposes of clarity such Milestone Payments are due from Licensee irrespective of whether the associated Development Milestone listed below was reached by Licensee itself or by a Sublicensee or by a third party acting on behalf of Licensee or a Sublicensee.
A. One hundred thousand US dollars ($100,000) upon enrolling the first patient in a phase II clinical trial of a Licensed Product being developed in the Therapeutics Field.
B. Two hundred and fifty thousand US dollars ($250,000) upon enrolling the first patient in a phase III clinical trial of a Licensed Product being developed in the Therapeutics Field.
C. Two million and five hundred thousand US dollars ($2,500,000) upon receiving FDA approval for a Licensed Product being developed in the Therapeutics Field.
D. Two million US dollars ($2,000,000) upon receiving EMA approval for a Licensed Product being developed in the Therapeutics Field.
E. One million US dollars ($1,000,000) upon achieving a First Commercial Sale of a Licensed Product in the Therapeutics Field.
Solely for purposes of this milestone payment provision, two products will be deemed to be two different Licensed Products if such products (i) have been approved by the FDA to treat different diseases or are in clinical trials to assess their efficacy in treating different diseases and/or (ii)comprise or consist of different active pharmaceutical ingredients. Different stages of cancer within the same organ (e.g. stage 4 prostate cancer and stage 3 prostate cancer) are not “different diseases”.
When cumulative Net Sales of all Licensed Products reach the amounts set forth below, Licensee will make the following milestone payments within thirty (30) days of reaching such cumulative Net Sales threshold:
F. One million five hundred thousand US dollars ($1,500,000) when cumulative Net Sales of all Licensed Products reaches fifty million dollars ($50,000,000).
G. Five million US dollars ($5,000,000) when cumulative Net Sales of all Licensed Products reaches two hundred and fifty million dollars ($250,000,000).
11. PATENT FILING, PROSECUTION AND MAINTENANCE
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11.2 Past & Ongoing Patent Costs. Licensee will bear all out-of-pocket costs incurred by The Regents for Patent Actions (“Patent Costs”).Licensee must reimburse to The Regents Patent Costs incurred prior to the term of this Agreement (“Past Patent Costs”) within thirty (30) days of Licensee’s receipt of an invoice from The Regents. As of February 17, 2022, these Past Patent Costs are approximately Twenty Thousand Four Hundred and Fifty Three US Dollars ($20,453). With respect to Patent Costs incurred during the term of this Agreement (“Ongoing Patent Costs”), such Ongoing Patent Costs will be directly billed to Licensee by The Regents’ patent counsel; to the extent the parties have not already entered into a direct billing agreement, then concurrently with execution of this Agreement Licensee, The Regents and The Regents’ patent counsel will enter into a direct billing agreement. At The Regents’ sole discretion, rather than requiring Licensee to pay such amounts pursuant to a direct billing agreement, The Regents may (1) bill Licensee for Ongoing Patent Costs after such amounts are incurred, in which case payment will be due to The Regents within thirty (30) days of Licensee’s receipt of an invoice from The Regents, or (2) require Licensee to pay in advance The Regents’ patent counsel’s estimated costs for undertaking Patent Actions that occur during the term of this Agreement before The Regents authorizes its patent counsel to proceed (“Advanced Payment”).